Will Investors Consider Your Startup a Startup?

by Mitesh Sanghvi ·
Published February 27, 2016
· Updated February 13, 2017

Nowadays, plenty of youngsters are starting up with their startups. To have a startup and also have a tag of ‘Founder’ is a cool thing to have. Additionally, these startups do not have to do much with the profitability and long term market validation. These bunch of enthusiasts are looking for market validation because accelerators, incubators and investors need it before investing hefty amount of funds in their beloved startups. I completely appreciate these trend because it is compelling young chaps to start-up at a very early age and by the time they reach their mid-twenties they have already got their hands dirty with multiple start-ups.

Here’s an excerpt from a blog post I’ve come across when I was doing my study on ‘The Journey of Global Technology Startups: From An Idea To a Global Company’. It was written by Paul Graham, Founder, Y Combinator.

“The distinction between a start-up and any other new company should be obvious but is often overlooked: not every newly founded company is a start-up. Millions of companies are started every year in the US. Only a tiny fraction of them are start-ups. Most are service businesses—restaurants, barbershops, plumbers, and so on. These are not startups, except in a few unusual cases. A barbershop isn’t designed to grow fast. Whereas a search engine, for example, is.

The difference is why there’s a distinct word, “start-up,” for companies designed to grow fast. If all companies were essentially similar, but some through luck or the efforts of their founders ended up growing very fast, we wouldn’t need a separate word. We could just talk about super-successful companies and less successful ones. But in fact start-ups do have a different sort of DNA from other businesses. Google is not just a barbershop whose founders were unusually lucky and hard-working. Google was different from the beginning.

To grow rapidly, you need to make something you can sell to a big market. That’s the difference between Google and a barbershop. A barbershop doesn’t scale.

If you want to start a start-up, you’re probably going to have to think of something fairly novel. A start-up has to make something it can deliver to a large market, and ideas of that type are so valuable that all the obvious ones are already taken. That space of ideas has been so thoroughly picked over that a start-up generally has to work on something everyone else has overlooked.”

Don’t be skeptical about your startup after reading the above paragraph. That is the opinion of a Venture Capitalist and the co-founder of world’s most powerful incubator. Paul Gramham was the one to convince his cofounders and team of Y Combinator to give admission to AirBnb when they have applied with their idea. Because, he saw the passion and conviction the cofounders of Airbnb had for their idea.

Paul Graham admitted that even though he was not a fan of Airbnb’s idea, he was impressed by their creative methods for bootstrapping their funding situation by selling cereal (Google it!).
Therefore, it says that no matter whether your idea/startup falls under the definitions of a startup or not, you should persevere to make your idea a reality. But wait… there’s a catch! You can persevere about your idea only if you have deep rooted belief and conviction about what you are trying to do.

Lucrative rewards like million dollars of funding, billion dollars of valuation or a tag of ‘Unicorn’ won’t help you to persevere, I guess!